The shopper and retailer landscape in Asia-Pacific has been shifting on a fundamental level over the past decade, but we’ve also seen marked changes over the past year. While less-recent changes have particularly centered around drivers of store choice, newer shifts are reflective of much different attributes. Specifically, today’s shoppers are more sophisticated and demanding of retailers. So while they still want the basics, they also expect an enjoyable shopping experience.

Amid the variety of developments we saw throughout the past year, we believe six trends will have the most significant and long-term impact on the sector.

1. SHOPPER SPENDING HAS SLOWED IN ASIA PACIFIC

While growth in the retail grocery sector was strong in 2012 (sales were up more than 12 percent and volume was up nearly 7 percent), driven primarily by the large developing countries in the region, trends softened in 2013. On the whole, consumers throughout the region have maintained an air of cautious optimism; however, economic uncertainty due to factors like less governmental economic aid in the U.S. and currency weaknesses in emerging markets are negatively affecting growth. The majority of Asia Pacific markets have witnessed the slowdown, as Indonesia and the Philippines are the only two markets in the region to retain their 2012 growth levels.

2. RETAILERS BOOST THEIR INVESTMENTS IN NEW STORES

Leading retailers across the region are investing heavily in new stores. In 2012, the number of modern trade stores increased by 13 percent, which is consistent with the region’s growth over the past decade. Within Southeast Asia, the Philippines and Malaysia experienced the highest level of activity in new modern trade store openings; however, traditional trade still accounts for the lion’s share of grocery spending across the region, and Nielsen forecasts it will continue to do so in the years to come, remaining as high as 40 percent in 2020.

3. PROMOTIONAL ACTIVITY HEATS UP IN DEVELOPED MARKETS

Promotional activity in developed markets in Asia Pacific, particularly Australia and New Zealand, continued to surge during the past year. Grocery prices in both markets have declined because retailers have adopted aggressive promotional and everyday low price strategies. Other developed markets in the region, including South Korea, Singapore and Taiwan, experienced a general slowdown in growth in the first half of 2013.

4. RETAILERS HONE IN ON ONLINE GROCERY RETAILING OPPORTUNITIES

Online grocery retailing is still in a nascent phase across most of the Asia Pacific region, as less than one-in-10 shoppers regularly access grocery retail websites. South Korea is the notable exception, however, as close to 80 percent of grocery shoppers there regularly purchased grocery products online in 2012, and the frequency of purchasing increased to nine times a month from seven times a month in 2011. Most of the retailers across the region see opportunity in online retailing and are investing in online strategies. Consequently, grocery retailers’ digital footprint will expand in the year ahead as they identify new ways to engage and sell profitably through online channels.

5. EXPANSION OF SMALL FORMAT STORES CONTINUES

The growth of smaller format stores has been a key theme over the past five years, dominating headlines in many countries. While China leads this growth in terms of store numbers, the fastest rate of growth in minimarket store openings was seen in markets like Malaysia, while Thailand continued to see rapid convenience store expansion. The increased convenience afforded to shoppers in making everyday grocery purchases has been the key impact of this expansion. This has, in turn, resulted in an increase in shopping trips for smaller baskets and fewer trips for major big-basket pantry re-stocking efforts. With lifestyle changes, growth in middle class populations and an increase in single person and small households, this trend will only increase over the coming years.

6. INCREASING COMPETITION AMONG TOP-TIER RETAILERS

Regional retailers focused on active expansion across Asia-Pacific in the past year and were largely accountable for the 13 percent increase in store numbers. Conversely, global retailers’ expansion into the region has slowed due to the economic and competitive pressures they’re facing in their home markets. As a result of the increase in store numbers, competition has invariably heightened, and in a number of Asian markets, the top five grocery retail chains account for 80 percent or more of modern trade sales. Merger and acquisition activity will increase in many Asia-Pacific countries in the year ahead as retailers strive to gain the necessary scale to dominate markets and leverage their size when purchasing.

In order to address these shifts, retailers across Asia-Pacific must broaden their understanding of evolving shopper behaviour, anticipate changing needs and develop strategies focused on differentiation in areas that matter most to shoppers.

Insights in this article are taken from Nielsen’s 2013 Asia Pacific Retail & Shopper Trends Report. For more information on the report contact Peter Gale or your local Nielsen representative.